IR35

Thinking of Closing Your Company?

The off-payroll working rules were designed to ensure that any contractor who is working like an employee pays employment taxes, but hirers are tending to adopt internal policies on hiring limited company contractors rather than applying those rules. High level decisions are apparently being made, which is resulting in the cessation of the use of contractors and their personal service companies across the UK.

There is absolutely no basis for this stance, other than an administrative one, and this may change after a while, so perhaps a better alternative to closure is parking your PSC temporarily, allowing you to ascertain whether the market has changed in a year or so.

However, if you think it likely that none of your clients will ever adopt the new rules and will always offer contracts on an employed basis in future, whether that’s a permanent employment, or via an agency/umbrella company, then perhaps it is time to consider closing your company.

There is useful guidance on the Gov website about closing your company which is worth a read – https://www.gov.uk/closing-a-limited-company

Issues

Generally, closing a small company involves filing the final company returns, paying any taxes due, transferring the company assets to the director(s) assuming they are the shareholders, and notifying Companies House and HMRC that the company has ceased to trade and should be struck off the register.

Since the increased activity around IR35, contractors have another issue to deal with, and that’s the concern over whether IR35 could have retrospectively applied to past contracts, because if the company is closed, this could leave a tax debt with the director.

This concern is heightened if the reason for closing the company is because your hirers have seemingly decided that IR35 does apply to your contract, by either deeming contracts inside IR35 or flatly refusing to take on the responsibility for deciding whether IR35 applies or not.

Solution

If you decide to close your company you must use the appropriate exit strategy to reduce the risk of an issue with IR35 arising in the future. If you work on agency contracts, the risk of an IR35 enquiry increases, as HMRC has been collating data on every PSC paid via agencies since 2014, but there is actually a get out clause, if you have gathered sufficient evidence before your company is closed, and have prepared an argument.

If you are set on closing your company, we will not try to talk you out of that, but will check that it is the right thing to do, by looking at the industry, clients and type of contract you are supplying your services under, then we will provide you with a cocktail of services, for little more than the cost of standard accountancy fees.

Checklist

Our fee covers;

  • your penultimate set of company accounts
  • a final set of company accounts or
  • dormant company accounts
  • personal tax returns
  • an IR35 assessment and
  • an assessment of potential liability under agency legislation
  • company secretarial and closure

The last assessment is important if you do become involved in an IR35 enquiry after your company has closed, as any debt that is raised under agency legislation, can be transferable to the agencies you have contracted with, particularly if operating via your company was a requirement of securing the contract or contracts.

CWC Solutions will carry out the two assessments, which will be digitally stored for ten years, after which time you will be asked if you would like your data to be destroyed.

You will also use Aequalis Accounting Ltd for your final accounting needs and the company closure. You can find out about the other services that Aequalis provides here…. www.aequalis.tax Tel: 01268 219330

Transferring to us from your current accountant is easy, simply get in touch using the contact form or by calling the above number, and we will do the rest. Once registered we will start your assessments, take over your accounting needs and make sure that closing your company provides the peace of mind you are looking for.